"How China fooled the world" debt 200% of GDP

TickersPlaysPop

Is China crashing a surprise to anybody? Maybe not now but not many people cared when I started this thread back in Feb 2014.

I resurrected this thread a few times and posted separately about China, and I've always been surprised at people's "couldnt care less attitude" and opinions about China and how its economy could affect the UK.

Only the true experts know what will happen....

My guess is a move of the debt bubble from China to African countries. It already moved from the west to China in 2008... its like pass the parcel... but it keeps getting bigger with each stop of the music!

What will happen to interest rates here? Surely they can't go up fast until the government significantly reduces it's huge debt?

Is this why the government has changed rules around rentals? Maybe partly to head off labour as a key election policy, and maybe also to profit from the likely surge in property prices. If markets are tanking, interest rates low.... what can the investors make money from? Residential property?

Mistermeaner

Ummmmmmmm. No.

Thrugelmir

Only in the UK does every conversation revolve around property. :doh:

cells

Thrugelmir wrote: »

Only in the UK does every conversation revolve around property. :doh:

not in the real world it doesn't but this is a part of a forum about housing and the economy.

building residential property is the biggest part of most economies, car manufacturing often comes second. Its even more important and larger when you look at it in terms of fixed investment.

The worlds housing stock needs to grow to 4 billion units and that will represent some $400 trillion of assets.

cells

TickersPlaysPop wrote: »

Is China crashing a surprise to anybody? Maybe not now but not many people cared when I started this thread back in Feb 2014.

I resurrected this thread a few times and posted separately about China, and I've always been surprised at people's "couldnt care less attitude" and opinions about China and how its economy could affect the UK.

Only the true experts know what will happen....

My guess is a move of the debt bubble from China to African countries. It already moved from the west to China in 2008... its like pass the parcel... but it keeps getting bigger with each stop of the music!

What will happen to interest rates here? Surely they can't go up fast until the government significantly reduces it's huge debt?

Is this why the government has changed rules around rentals? Maybe partly to head off labour as a key election policy, and maybe also to profit from the likely surge in property prices. If markets are tanking, interest rates low.... what can the investors make money from? Residential property?

More debt is fine because there are more fixed assets. Or rather the debt is financing the building of fixed assets

Somewhere in the region of 1 million new homes are build PER WEEK in the world.

The growing 'debt bubble' is only surprising when you dont account for the fact that the world is growing at a rate never seen before in human history. The world is currently living through the great industrial revolution.

mwpt

cells wrote: »

The growing 'debt bubble' is only surprising when you dont account for the fact that the world is growing at a rate never seen before in human history. The world is currently living through the great industrial revolution.

Isn't the absolute value of the debt irrelevant? What's important is the debt ratios to other key factors. Are we still on safe ground in that respect?

cells

mwpt wrote: »

Isn't the absolute value of the debt irrelevant? What's important is the debt ratios to other key factors. Are we still on safe ground in that respect?

mostly the debt is a number on a computer

the factories and homes and roads and ports and offices and airports and universities and everything else will exist whatever some folk sitting behind a computer in a global city far far away wants to deem the value of the debt to be on that particular day

we are not in a world war where real destruction is happening.

however what is real is that the financial markets can spook people enough to slow down a bit this progress so in that regard lets hope we dont fall into another recession.

mwpt

cells wrote: »

mostly the debt is a number on a computer

I disagree, debt has real implications because it is trust that makes markets work.

But that isn't what I asked. I asked if it was the debt ratios that were important rather than the absolute debt.

cells

mwpt wrote: »

I disagree, debt has real implications because it is trust that makes markets work.

But that isn't what I asked. I asked if it was the debt ratios that were important rather than the absolute debt.

yes debt ratios are more important than debt nominal however like with most statistics people look at one thing and think they are seeing a like for like comparison when it takes a bit more skill and understanding to try and work out what they are actually looking at

debt to GDP can be meaningless, because infrastructure can grow faster than GDP so that needs to be taken into account

I would think debt to assets would be the best measure, but then you can never have too much or too little debt because more or less $1 of new debt creates $1 of new assets on a banking sheet


personally I see the next 50 years as very bright for the world with maybe only africa still poor and the rest of the world much much richer and healthier than it is now

mwpt

cells wrote: »

personally I see the next 50 years as very bright for the world with maybe only africa still poor and the rest of the world much much richer and healthier than it is now

Personally I see incentives as all wrong. So much "money" (debt) is being allocated into assets that are not productive, ie. property and financial speculation. I know it's a lot more complicated than what I'm saying, and the money is to an extent redistributed, but I cannot speak of a chaotic market in complete terms. So I resort to massive simplifications and my general sense is that we are encouraging all the wrong types of investment, for the worse of most people.

However, it is lucky for us humans that this comes at the same time as the next leg up in the tech revolution. We've seen some innovative and life changing products and we're on the cusp of seeing a lot more. AI will be an incremental thing. (I worked in this field back in my grad days btw). People expect a big bang but things rarely happen like that. What we'll see is things like the automated home, offices, and so forth. Eventually it'll all come together and we'll get some truly life changing tech. We may even possibly be close to the all important cheap energy. I think this is going to be what saves us, luckily.

So I'm pessimistic about debt and allocation of capital, but overall I'm positive for our future based on tech.

EDIT: Just to add that there is one big caveat in my hope for tech. The same tech will be available to religious and other nutters. We may find we live in a very dangerous world in the future, unless it works out that prosperity just defuses all the craziness.